Free Motion to Compel - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS GRAPEVINE IMPORTS, LTD., a Texas Limited Partnership, and T-TECH, INC., a Texas Corporation as Tax Matters Partner, Plaintiffs, v. United States of America, Defendant. § § § § § § § § § §

Case No. 05-296T Judge Francis M. Allegra

PLAINTIFFS' MOTION TO COMPEL PRODUCTION RELATED TO CHERYL KIGER'S EXPERT REPORT AND INCORPORATED MEMORANDUM COME NOW Plaintiffs, Grapevine Imports, Ltd. and T-Tech, Inc. ("Plaintiffs") and file this Motion to Compel Production Related to Cheryl Kiger's Expert Report and Incorporated Memorandum. On December 13, 2006, Defendant filed a notice with the Court stating that the Government intended to withdraw its designated expert, Cheryl Kiger, and would proceed at the upcoming January hearing without an expert. At the same time, the Government notified

Plaintiffs' counsel that it would not comply with Plaintiffs' Second Request for Production related to Ms. Kiger's report because the request was moot. It is not. Plaintiffs should be granted complete discovery of the non-privileged materials relied upon in Ms. Kiger's report, including draft reports and her correspondence with the IRS and Department of Justice regarding this report. To the extent to which the Government claims privilege as to these materials, the Government should be required to invoke privilege and provide a privilege log so that the merits of the invocation and possible waiver can be evaluated. The Government's refusal to respond to

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a valid request for production is not an appropriate invocation of privilege.

Plaintiffs

respectfully request that the Court enforce their Second Request for Production and require the Government to make a proper claim of privilege for the materials related to Ms. Kiger's expert report. I. Factual and Procedural Background On August 1, 2006, the Court filed a scheduling Order setting dates for a hearing on the applicability of 26 U.S.C. § 6501(e)(1)(A). The Court required the parties to designate their expert witnesses by August 31, exchange expert reports by September 29, take depositions by October 31, and file pretrial memoranda by December 22. The Government designated Cheryl Kiger as an expert witness on August 31 and made no other expert designations. The parties exchanged expert reports on October 4, after an extension at the Government's request. The parties took depositions of Plaintiffs' expert, Gerald ("Jerry")

Songy, and the Government's expert, Cheryl Kiger, on October 27. In her deposition, Ms. Kiger gave numerous observations and opinions which were favorable to Plaintiffs, as will be discussed. During these depositions, the Government requested copies of correspondence

between Mr. Songy and Plaintiffs' counsel, and asked that it be provided within the week. (Exhibit A). Plaintiffs also asked for correspondence between Ms. Kiger, Department of Justice counsel, and IRS counsel relating to her expert report, and counsel for the Government agreed that the correspondence would be provided in the same time-frame. (Exhibit B). On November 3, 2006, Plaintiffs' counsel provided copies of their correspondence with Mr. Songy to the Government. The Government did not respond with their correspondence as agreed. On November 14, Plaintiffs' counsel again requested the correspondence via email, and counsel for the Government gave a vague response that the documents were coming soon.

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(Exhibit C).

On November 21, Plaintiffs' counsel again requested the correspondence via

voicemail, and again received a non-committal response that the documents were forthcoming. On November 22, Plaintiffs served a Second Request for Production of Documents upon the Government for the correspondence. (Exhibit D). Because almost thirty days had passed since Plaintiffs' initial request, Plaintiffs gave a deadline to respond of December 1. That date passed without any response from Government counsel. On December 5, in sending Plaintiffs' discovery responses to the Government, Plaintiffs again requested the documents. (Exhibit E). One week later, on December 13, the Government filed the Withdrawal of Expert Witness with the Court and sent Plaintiffs a letter stating that production would not be forthcoming because Plaintiffs' request for production was moot. (Exhibit F). As this background demonstrates, the Government should have been aware as early as the first week of November that there were potential problems with materials given to their designated expert, Cheryl Kiger. Instead of informing the Court and opposing counsel promptly of their concerns, the Government has engaged in a pattern of delay and excuses. Their

eleventh-hour attempt to avoid Plaintiffs' legitimate discovery requests should not be condoned. Plaintiffs are not seeking discovery of any materials which are legitimately privileged; rather, they are seeking the non-privileged materials related to Ms. Kiger's report to which Plaintiffs are entitled under Rule 26 of the Federal Rules of Civil Procedure. If the Government has a claim of privilege, it must make such a claim specifically and provide the Court with adequate information to evaluate the claim of privilege and the possibility of waiver. The Government has even failed to name what privilege applies to the materials at issue, but has instead withheld all documents related to Ms. Kiger's report.

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II. Standard of Review of Motion to Compel A. In general Pursuant to Rule 37(a)(2)(A) of the Federal Rules of Civil Procedure, any party may move to compel disclosure of any matter required to be disclosed under Rule 26(a) if the party at issue fails to make the required disclosure. The sanctions and curative actions which may be imposed under Rule 37 are soundly within the discretion of the district court. National Hockey League v. Metro. Club, Inc., 427 U.S. 639, 643 (1976). The materials at issue in this motion fall within the matters required to be disclosed under Rule 26(a), as Plaintiffs' Second Request for Production seeks all documents provided to, reviewed by, or relied upon by the expert in formulating her opinion. The Advisory Committee on the federal civil rules has commented on the subject: The report is to disclose the data and other information considered by the expert and any exhibits or charts that summarize or support the expert's opinions. Given this obligation of disclosure, litigants should no longer be able to argue that materials furnished to their experts to be used in forming their opinions ­ whether or not ultimately relied upon by the expert ­ are privileged or otherwise protected from disclosure when such persons are testifying or being deposed. Rule 26, 1993 Amendments, Comment to Paragraph (2) (emphasis added). B. Standard of Review of Plaintiffs' Request Rule 26(b)(4) makes a distinction for discovery purposes between testifying and nontestifying experts. Virtually all materials relied upon by a testifying expert in forming his or her opinion are discoverable. However, the opinions and materials relied upon by non-testifying experts are generally only discoverable upon a showing of exceptional circumstances "under which it is impracticable for the part seeking discovery to obtain facts and opinions on the same subject by other means." Fed. R. Civ. P. 26 (b)(4)(B).

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However, Rule 26 is silent as to the scope of discovery for an expert like Cheryl Kiger ­ one who has been designated as a testifying expert but whose designation has been withdrawn. Plaintiffs submit that the appropriate standard of review for proposed discovery of such an expert is the standard set forth in Rubel v. Eli Lilly and Company, 160 F.R.D. 458, 460 (S.D.N.Y. 1995).1 In that case, a physician expert was initially consulted by counsel for the defendant. Id. at 459. The physician examined plaintiff, gave a report, and was deposed by plaintiff. Id. The physician had never been designated as a testifying witness by either party. Id. The plaintiff sought to introduce the physician's deposition at trial and to subpoena the physician, efforts which the trial court denied. Id. The trial court upon reconsideration articulated the standard it used to evaluate the plaintiff's request. Id. at 459-60. The court observed that: there is an important interest in allowing counsel to obtain the expert advice they need in order properly to evaluate and present their clients' positions without fear that every consultation with an expert may yield grist for the adversary's mill. This policy underlies Fed.R.Civ.P. 26(b)(4)(B)'s severe limitation on the discovery of consultative, as opposed to testifying experts. Where, as here, the party who consulted the expert in question has allowed discovery without objection, the policy has little or no implication. Id. at 460. The court held that "the extraordinary circumstances standard [of Rule 26(b)(4)(B)] was promulgated, at least in part, to protect the interest in free consultation between counsel and non-testifying experts. Once Lilly acquiesced in the deposition, it surrendered the protection to the extent it was designed to protect that interest." Id. (emphasis added). Instead, the Rubel court found that the question of what further testimony or discovery should be allowed of the expert was governed by Federal Rule of Evidence 403. Id. at 461. The court weighed the plaintiff's legitimate need for the testimony and its probative value against the prejudicial effect that such testimony would have on the defense. Id. at 461-62. In that case, the

1

There is a conflict in the case law regarding the appropriate standard, as will be discussed infra.

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probative value of the testimony was not sufficient to allow its use at trial in light of the delay of the plaintiff in designating the expert. Id. at 462. The Rubel approach of using Rule 403 to balance the probative value of the expert discovery against the prejudice to the opposing party has been followed in numerous other cases. See Ferguson v. Michael Foods, Inc., 189 F.R.D. 408 (D. Minn. 1999); Agron v. Trustees of Columbia Univ., 176 F.R.D. 445 (S.D.N.Y. 1997); House v. Combined Ins. Co., 168 F.R.D. 236 (N.D. Iowa 1996). Also, the Eleventh Circuit has observed that designation of an expert witness to testify at trial can impose a duty to disclose matters related to that expert's opinion even if the expert does not testify. Peterson v. Willie, 81 F.3d 1033, 1037 (11th Cir. 1996). 1. The Balance Tips Toward Disclosure in This Case. Plaintiffs' request for disclosure of Cheryl Kiger's expert correspondence satisfies the Rubel balancing standard, and the correspondence should be disclosed for this reason. As the above-cited cases demonstrate, a withdrawn expert like Ms. Kiger should not be considered a non-testifying expert for purposes of Rule 26(b)(4). The Government timely designated her as an expert, gave Plaintiffs her report and some of the materials she relied upon in preparation, and voluntarily submitted her to deposition. By these actions, the Government has waived any protection offered to a non-testifying expert. The Government has indicated no intent to use Ms. Kiger as a consultant, and she should not be afforded the protection of "free consultation" that the exceptional circumstances test of Rule 26(b)(4)(B) provides. In addition, if there are any "inadvertent disclosures" in the correspondence of Ms. Kiger as asserted by the Government, that judgment is for the Court, not the Government. It is unclear from the Government's withdrawal of Ms. Kiger what privilege the Government alleges should apply to the materials at issue. The appropriate Government response at this stage is to disclose

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the materials requested with relevant redactions and to file privilege logs and/or motions for protective orders with the Court ­ not to withhold documents unilaterally. Plaintiffs are not seeking disclosure of legitimately privileged documents, but are only seeking a specific invocation and fair evaluation of the Government's claim of privilege. It is inconceivable that the entire range of Ms. Kiger's correspondence with IRS counsel and the Department of Justice in this case would be privileged, even if the Court finds some portion of that correspondence is privileged. Moreover, Ms. Kiger is not an attorney and is essentially a third party to these proceedings: it is unclear what privilege would apply to the Government's communications with her. Thus, there is little prejudice to the Government in producing the correspondence repeatedly requested by Plaintiffs. On the other hand, Plaintiffs have spent numerous months and significant resources in responding to Ms. Kiger's report, in taking and reviewing her deposition, and responding to her key arguments. Plaintiffs have fully and timely complied with the Government's requests for information regarding our expert during the discovery process. Now, one week before pretrial submissions are due in this Court, the Government has made an eleventh-hour attempt to skirt the Court's clear directive that expert testimony should be provided on Internal Revenue Code Section 6501(e)(1)(A) by withdrawing their expert as a testifying expert. The Court should be aware that Ms. Kiger's deposition testimony was damaging to the Government's case. Ms. Kiger revealed in her deposition that her report failed to address a key element of the Court's inquiry at the January 18th hearing ­ what the IRS required to be reported on the tax returns at issue. There are multifold instances of Ms. Kiger's refusal to address this issue in her deposition. Moreover, Ms. Kiger essentially agreed with major portions of

Plaintiffs' expert report and stated several times that a reasonable revenue agent should have

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examined the tax returns at issue.

These admissions substantially weakened Ms. Kiger's

credibility as an expert witness for the Government and enhanced Plaintiffs' position that the transactions at issue were adequately disclosed. It is not surprising that the Government has withdrawn this potentially damaging expert. The Government has been on notice since October 27 that Plaintiffs sought all correspondence with Ms. Kiger, but only six weeks later on the eve of pretrial submissions have the Plaintiffs been made aware of problems with Ms. Kiger's testimony. Plaintiffs are entitled to review all non-privileged materials that Ms. Kiger relied upon in forming her expert opinion and preparing her report. These materials include draft reports and correspondence with counsel. No attorney-client privilege or work-product privilege attaches to an expert's materials, even for a consultative expert. See Kathleen Michaela Brennan, Note, Must the Show Go On? Defining When One Party May Call or Compel an Opposing Party's Consultative Expert to Testify, 78 Minn. L. Rev. 1191 (1994). 2. The Exceptional Circumstances Cases Are Distinguishable. The Government will argue in response to this motion that their withdrawal of Ms. Kiger as a testifying expert shields her correspondence from disclosure under the "exceptional circumstances" test of Rule 26(b)(4)(B). However, the cases that have applied this test to an expert whose opinions have been disclosed are all distinguishable from the present case. None of these cases involved the fact situation present here, that is, where a party has designated an expert, voluntarily submitted the expert's report to the opponent, voluntarily submitted the expert to deposition, and then withdrawn the expert after the expert has given damaging deposition testimony.

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For example, In re Shell Oil Refinery, 132 F.R.D. 437, 440 (E.D. La. 1990) involved a premature request for discovery: expert designations were not due and had not occurred. In Dayton-Phoenix Group, Inc. v. General Motors Corporation, No. 3-95-480, 1997 WL 1764760 at *1-2 (S.D. Ohio Feb. 17, 1997), the defendant had continuously opposed discovery of the expert and had never given the expert's opinion or submitted the expert to deposition. FMC Corporation v. Vendo Company, 196 F.Supp.2d 1023, 1041-47 (E.D. Cal. 2002) involved a "free-riding" problem of one defendant attempting to obtain the benefit of the experts retained by other defendants, not present in the instant case. Several other cases involve fact patterns which are also distinguishable from the present case.2 However, should the Court determine that the "exceptional circumstances" standard of Rule 26(b)(4)(B) applies to this motion, Plaintiffs argue that this case meets this standard. The Court ordered the Government to produce an expert on the Section 6501(e)(1)(A) issue. The Government has flatly contravened that order by withdrawing their expert. Moreover, the expert's withdrawal at the eleventh-hour, one week before pretrial submissions are due and after repeated requests from the Plaintiffs, is prejudicial to Plaintiffs. III. Conclusion Despite having had notice of Plaintiffs' request for the information at issue for almost two months, the Government has pulled a last-minute switch on Plaintiffs by withdrawing their testifying expert, Cheryl Kiger, and unilaterally making an unsupported, vague claim of privilege. Plaintiffs have spent substantial time and resources in preparing to defend against Ms.
2

See Employer's Reinsurance Corp. v. Clarendon Nat'l Ins. Co., 213 F.R.D. 422 (D. Kan. 2003) (deciding issue of whether purely consulting expert's testimony was admissible in a subsequent proceeding, and distinguishing the situation from Rubel); Durflinger v. Artiles, 727 F.2d 888, 891-92 (10th Cir. 1984) (involving breaches of ethics in hiring former experts of opposing party); Lehan v. Ambassador Programs, Inc., 190 F.R.D. 670 (E.D. Wash. 2000) (regarding interaction between Rule 35's medical examination requirement and expert disclosure under Rule 26, not at issue here); Callaway Golf Co. v. Dunlop Slazenger Group Am., No. 01-669, 2002 WL 1906628 (D.Del. 2002) (stating that the Rule 26(b)(4)(B) standard applies regardless of what expert does before withdrawal; facts of case did not involve disclosure of opinion before withdrawal; statements are likely dicta).

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Kiger's report. The Court should require the Government to raise its concerns about "inadvertent disclosure" through appropriate means, redaction of allegedly privileged material and submission of privilege logs. The balancing standard articulated in Rubel under Rule 403 of the Federal Rules of Evidence should apply to disclosure of Ms. Kiger's expert correspondence. This rule strikes the appropriate balance of fairness to the parties and takes into account the distinction between a purely consultative expert and an expert like Ms. Kiger, who was offered in all respects as a testifying expert but was later withdrawn on the eve of a hearing. Under this standard, there is little prejudice to the Government in producing the expert correspondence, at least in some redacted form. The probative value of this material is great to the Plaintiffs, as the disclosure of the correspondence is required under Rule 26(a) and as the material will assist the Plaintiffs in discovering the basis of Ms. Kiger's expert opinions. WHEREFORE, for all these reasons, Plaintiffs respectfully request that their Motion to Compel Production Related to Cheryl Kiger's Expert Report be granted.

Respectfully submitted on December 20, 2006, By: /s/ M. Todd Welty________ M. Todd Welty Texas State Bar No. 00788642

MEADOWS, OWENS, COLLIER, REED COUSINS & BLAU, L.L.P. 901 Main Street, Suite 3700 Dallas, TX 75202 (214) 744-3700 Telephone (214) 747-3732 Facsimile [email protected] ATTORNEY-IN-CHARGE FOR PLAINTIFFS

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CERTIFICATE OF CONFERENCE I certify that on December 13, 2006 I spoke to Grover Hartt, counsel for the United States, concerning this Motion and he stated that he opposed this Motion.

/s/ M. Todd Welty__________ M. TODD WELTY

CERTIFICATE OF SERVICE I hereby certify that on December 20, 2006, I electronically filed the foregoing pleading with the Clerk of the Court using the ECF system which will send notification of such filing to the following: Grover Hartt, Esq. U.S. Department of Justice--Tax Division 717 N. Harwood, Suite 400 Dallas, Texas 75201 /s/ M. Todd Welty M. TODD WELTY

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